Asciano predicts slowdown in container shipments

‘It’s a little softer than hoped, particularly in rail and a bit in terminals,’ Asciano chief executive John Mullen said.
Photo: Luis Ascui

by
Jenny Wiggins

Concerns the retail industry could be in for another disappointing Christmas have been underscored after
Asciano
warned growth of container shipments through its ports would slow over the next few months.

Although container lifts through Asciano’s Patrick ports were strong in the fiscal first quarter, up 6.3 per cent, chief executive
John Mullen
warned lifts were boosted by rising market share, and said underlying growth remained “fairly subdued" at 2 to 3 per cent.

Shipping lines had been cancelling deliveries to Patrick’s container ports, raising concerns about the outlook, Mr Mullen said. “There are some eleven cancellations in the second quarter for ships that we’d expected to see coming to Australia."

Retailers have been reporting sluggish sales in the run-up to Christmas, Coles this week reporting the lowest rate of same-store sales growth since the fourth quarter 2012, and Pacific Brands warning that first-half profits will fall “materially".

Still, Asciano’s share of the container market rose to 49 per cent at the end of the first quarter, up from 47 per cent in June, and labour productivity was continuing to improve, Mr Mullen said.

“Industrially it’s stable, the general performance of the terminals at the moment is really very strong. If we just had a bit more volume, we’d be shooting the lights out."

Asciano’s shares, which have been trading close to 52-week highs of $6.23, fell 4.9 per cent to $5.90 after the group’s first-quarter volume update.

Rail business slows

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The performance of Asciano’s Pacific National rail business deteriorated in the first quarter, with rail ­volumes down 6.1 per cent.

The rail business, which hauls agricultural commodities such as grain as well as containerised freight, was Asciano’s “most troublesome area", Mr Mullen said.

Asciano forecasts Pacific National’s fiscal 2014 earnings before interest and taxation (EBIT) will be 5 to 10 per cent lower than last year, due to a 2.6 per cent fall in volumes of intermodal freight.

The decline reflected the downturn in mining activity, with the mining boom in Western Australia having boosted freight volumes on the east-west corridor in recent years, Mr ­Mullen said.

“The mining services demand in WA is what led to a lot of the volume growth and that has come back."

Some analysts scaled back their 2014 group EBIT forecasts for Asciano following the quarterly update, Merrill Lynch dropping its estimate by 1.4 per cent to $730 million.

But Merrill Lynch analyst ­Matthew Spence retained his “buy" ­rating, arguing that productivity improvements at the group’s terminals businesses and the ongoing strong performance of the group’s Pacific National coal business would support the stock.

Volumes hauled in Asciano’s Pacific National coal haulage business rose 16.5 per cent in the first quarter, and Mr Mullen said the company was hauling more than its contracted tonnes for some customers. NSW’s bushfires will, however, hurt October coal haulage volumes in the state after the company was forced to close rail lines temporarily during the fires, he added.

Asciano warned that the rebounding Australian dollar had increased its financing costs due to fair value adjustments to US dollar-denominated bonds.

Group first half EBIT is expected to be “in line" with the previous half, while full year EBIT is expected to grow.